Travelzoo Reports First Quarter 2014 Results

  Travelzoo Reports First Quarter 2014 Results

Business Wire

NEW YORK -- April 17, 2014

Travelzoo Inc. (NASDAQ:TZOO):

First Quarter 2014 Financial Highlights:

  *Revenue of $40.2 million, down 5% year-over-year
  *Operating profit of $7.0 million, down 13% year-over-year
  *Net income of $4.6 million
  *Earnings per share of $0.31, compared to $0.36 in the prior-year period

Travelzoo Inc., a global Internet media company, today announced financial
results for the first quarter ended March31, 2014, with revenue of $40.2
million, a decrease of 5% year-over-year. Operating profit was $7.0 million,
down 13% year-over-year. Net income was $4.6 million, with diluted earnings
per share of $0.31, down from $0.36 in the prior-year period.

"Our European business delivered strong results. North America reported weak
revenue. North America was impacted by a reduction in Search marketing spend
and slow Local voucher sales," said Chris Loughlin, chief executive officer.
"A positive highlight is the record number of mobile downloads we saw in the
quarter. We believe in our strategy of quickly adapting to mobile usage."

North America

North America business segment revenue decreased 12% year-over-year to $26.4
million. Operating profit for the first quarter was $4.6 million, or 17% of
revenue, down from $5.5 million, or 18% of revenue, in the prior-year period.

Europe

Europe business segment revenue increased 13% year-over-year to $13.8 million.
In local currency terms, revenue increased 6% year-over-year. Operating profit
for the first quarter was $2.4 million, or 17% of revenue, down from $2.6
million, or 21% of revenue in the prior-year period.

Subscribers

Travelzoo had a total unduplicated number of subscribers in North America and
Europe of 23.6 million as of March31, 2014, up 1% from December31, 2013. In
North America, total unduplicated number of subscribers was 16.7 million as of
March31, 2014, up 1% from December31, 2013. In Europe, total unduplicated
number of subscribers was 6.9 million as of March31, 2014, up 2% from
December31, 2013.

Update on Hotel Booking Platform

Travelzoo launched the first phase of its hotel booking platform at the end of
March. A select group of U.S. subscribers can now book hotels any night of the
year through Travelzoo. "We are working with many new hotels that previously
were unable to accept the Local voucher format," said Chris Loughlin, chief
executive officer. "The new platform also makes it easier for our subscribers
to book a hotel deal on their mobile phones." The hotel booking platform is
expected to begin contributing to revenues in the second quarter, an average
of 60 to 70 days after bookings occur. Travelzoo recognizes revenueupon the
hotel stay and not at the time of booking.

Income Taxes

Income tax expense was $2.5 million, compared to $2.5 million in the
prior-year period. The effective income tax rate was 35%, up from 31% in the
prior-year period.

Asset Management

During the first quarter of 2014, Travelzoo generated $1.8 million of cash
from operating activities. Accounts receivable increased by $52,000 over the
prior-year period to $15.4 million. Accounts payable increased by $2.1 million
over the prior-year period to $29.0 million. Capital expenditures were $1.0
million, up from $900,000 in the prior-year period. As of March31, 2014, cash
and cash equivalents were $61.0 million.

Conference Call

Travelzoo will host a conference call to discuss first quarter results at
11:00 a.m. ET today. Please visit http://www.travelzoo.com/earnings to

  *download the management presentation (PDF format) to be discussed in the
    conference call;
  *access the webcast.

About Travelzoo

Travelzoo Inc. is a global Internet media company. With more than 27million
subscribers in North America, Europe, and Asia Pacific and 25 offices
worldwide, Travelzoo® publishes deals from more than 2,000 travel and
entertainment companies. Travelzoo’s deal experts review offers to find the
best deals and confirm their true value. In Asia Pacific, Travelzoo is
independently owned and operated by Travelzoo (Asia) Ltd. and Travelzoo Japan
K.K. under a license agreement with Travelzoo Inc.

Certain statements contained in this press release that are not historical
facts may be forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities and Exchange Act
of 1934. These forward-looking statements may include, but are not limited to,
statements about our plans, objectives, expectations, prospects and
intentions, markets in which we participate and other statements contained in
this press release that are not historical facts. When used in this press
release, the words “expect”, “predict”, “project”, “anticipate”, “believe”,
“estimate”, “intend”, “plan”, “seek” and similar expressions are generally
intended to identify forward-looking statements. Because these forward-looking
statements involve risks and uncertainties, there are important factors that
could cause actual results to differ materially from those expressed or
implied by these forward-looking statements, including changes in our plans,
objectives, expectations, prospects and intentions and other factors discussed
in our filings with the SEC. We cannot guarantee any future levels of
activity, performance or achievements. Travelzoo undertakes no obligation to
update forward-looking statements to reflect events or circumstances occurring
after the date of this press release. Travelzoo and Top 20 are registered
trademarks of Travelzoo. All other names are trademarks and/or registered
trademarks of their respective owners.

                                         
Travelzoo Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)
                                              
                                 Three months ended
                                 March 31,
                                 2014         2013
Revenues                         $  40,195   $  42,177
Cost of revenues                 4,777        3,985
Gross profit                     35,418       38,192
Operating expenses:
Sales and marketing              17,843       19,659
General and administrative       10,578       10,497
Total operating expenses         28,421       30,156
Income from operations           6,997        8,036
Other income                     122          31
Income before income taxes       7,119        8,067
Income taxes                     2,481        2,472
Net income                       $  4,638    $  5,595
Net income per share:                        
Basic                            $  0.31     $  0.36
Diluted                          $  0.31     $  0.36
Weighted average shares:
Basic                            14,880       15,362
Diluted                          14,970       15,371
                                              

                                                            
Travelzoo Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)
                                                                  
                                              March 31,     December 31,
                                              2014                2013
Assets
Current assets:
Cash and cash equivalents                     $   61,035          $  66,223
Accounts receivable, net                      15,355              13,986
Income taxes receivable                       1,388               2,656
Deposits                                      251                 396
Prepaid expenses and other current            2,538               3,202
assets
Deferred tax assets                           1,067               1,143
Restricted cash                               —                   200
Funds held for reverse/forward stock          212                13,668     
split
Total current assets                          81,846              101,474
Deposits, less current portion                1,231               1,168
Deferred tax assets, less current             2,032               2,032
portion
Restricted cash                               1,480               1,479
Property and equipment, net                   10,305              8,245
Intangible assets, net                        349                404        
Total assets                                  $   97,243         $  114,802 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable                              $   28,999          $  31,766
Accrued expenses                              9,820               10,543
Deferred revenue                              1,688               1,578
Deferred rent                                 271                 281
Income tax payable                            726                 —
Reserve for unexchanged promotional           11,500              12,726
shares
Payable to shareholders for                   212                13,668     
reverse/forward stock split
Total current liabilities                     53,216              70,562
Long-term tax liabilities                     10,546              10,436
Deferred rent, less current portion           3,111              2,469      
Total liabilities                             66,873             83,467     
Common stock                                  163                 163
Treasury stock                                (21,231      )      (15,662    )
Additional paid-in capital                    10,642              10,247
Accumulated other comprehensive loss          (613         )      (530       )
Retained earnings                             41,409             37,117     
Total stockholders’ equity                    30,370             31,335     
Total liabilities and stockholders’           $   97,243         $  114,802 
equity
                                                                             

                                               
Travelzoo Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)
                                                   
                                                   Three months ended
                                                   March 31,
                                                   2014          2013
Cash flows from operating activities:
Net income                                         $  4,638      $  5,595
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization                      701            716
Deferred income taxes                              76             193
Stock-based compensation                           395            307
Provision for losses on accounts receivable        (52        )   95
Net foreign currency effects                       (9         )   94
Changes in operating assets and liabilities:
Accounts receivable                                (1,288     )   (2,036     )
Deposits                                           133            (155       )
Income tax receivable                              1,266          1,564
Prepaid expenses and other current assets          447            350
Accounts payable                                   (2,984     )   (549       )
Accrued expenses                                   (1,294     )   850
Deferred revenue                                   110            (517       )
Deferred rent                                      5              (110       )
Income tax payable                                 722            —
Reserve for unexchanged promotional shares         (1,226     )   —
Other non-current liabilities                      111           103        
Net cash provided by operating activities          1,751         6,500      
Cash flows from investing activities:
Release of restricted cash                         200            —
Purchases of property and equipment                (1,019     )   (900       )
Net cash used in investing activities              (819       )   (900       )
Cash flows from financing activities:
Repurchase of common stock                         (5,569     )   —
Reverse/forward stock split, including             (479       )   —          
transaction costs
Net cash used in financing activities              (6,048     )   —          
Effect of exchange rate on cash and cash           (72        )   (1,662     )
equivalents
Net increase (decrease) in cash and cash           (5,188     )   3,938
equivalents
Cash and cash equivalents at beginning of          66,223        61,169     
period
Cash and cash equivalents at end of period         $  61,035    $  65,107 
Supplemental disclosure of cash flow
information:
Cash paid for income taxes, net                    $   335        $   10
                                                                             

                                                                  
Travelzoo Inc.

Segment Information

(Unaudited)

(In thousands)
                                                                            
Three months       North                        Elimination
ended March                              Europe     and Other       Consolidated
31, 2014           America
Revenue from
unaffiliated       $      26,353         $    13,842        $     —         $   40,195
customers
Intersegment       221                   12                 (233)           —
revenue
Total net          26,574                13,854             (233)           40,195
revenues
Operating          $      4,604          $    2,393         $     —         $   6,997
income
                                                                            
Three months       North                                    Elimination
ended March                              Europe             and Other       Consolidated
31, 2013           America
Revenue from
unaffiliated       $      29,911         $    12,266        $     —         $   42,177
customers
Intersegment       262                   108                (370)           —
revenue
Total net          30,173                12,374             (370)           42,177
revenues
Operating          $      5,484          $    2,552         $     —         $   8,036
income

Contact:

Media:
Travelzoo Inc.
Glen Ceremony, +1-212-484-4998
Chief Financial Officer
pr@travelzoo.com
 
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